The Stanley Works (SWK, Financial) filed Quarterly Report for the period ended 2010-10-02.
The Stanley Works has a market cap of $10.32 billion; its shares were traded at around $61.97 with a P/E ratio of 16.4 and P/S ratio of 2.7. The dividend yield of The Stanley Works stocks is 2.3%. The Stanley Works had an annual average earning growth of 2.3% over the past 10 years.SWK is in the portfolios of Lee Ainslie of Maverick Capital, John Rogers of ARIEL CAPITAL MANAGEMENT LLC, David Williams of Columbia Value and Restructuring Fund, James Barrow of Barrow, Hanley, Mewhinney & Strauss, Andreas Halvorsen of Viking Global Investors LP, Bruce Kovner of Caxton Associates, Richard Aster Jr of Meridian Fund, John Buckingham of Al Frank Asset Management, Inc., Steven Cohen of SAC Capital Advisors, Charles Brandes of Brandes Investment, Jean-Marie Eveillard of First Eagle Investment Management, LLC, Richard Pzena of Pzena Investment Management LLC, Ron Baron of Baron Funds, Louis Moore Bacon of Moore Capital Management, LP, Jeremy Grantham of GMO LLC, George Soros of Soros Fund Management LLC, Jim Simons of Renaissance Technologies LLC.
Construction & Do-It-Yourself (CDIY): CDIY net sales were $1.289 billion in the third quarter of 2010, up 294% from $328 million in the prior year. Black & Decker contributed 289% of the increase. Organic sales volume increased sales by 7%, while price and foreign currency translation each had a negative 1% impact. Organic sales growth was aided by the introduction of new hand tool products and storage lines, with growth in emerging markets, including Asia and South America. On a pro forma basis, the third quarter legacy Black & Decker power tools and accessories sales rose 7%, with an 8% increase from unit volume and 1% of negative price, associated with the successful new 12-volt compact lithium ion power tool products marketed under the DeWalt, Porter Cable and Black & Decker brands. The Black & Decker consumer products group pro forma sales rose in the high single digits boosted by emerging markets growth and strong new product performance. Consistent with the legacy Stanley business, the Black & Decker unit volume gains in Europe and emerging markets outpaced the Americas.
Segment profit was $164 million, or 12.7% of net sales, for the third quarter of 2010, compared to $48 million or 14.8% of net sales in the prior year. Excluding $6 million of merger-related costs, segment profit amounted to $170 million, or 13.2% of net sales, which compares with a 15.6% segment profit rate on a comparable basis in the second quarter of 2010. The segment profit rate, excluding such charges, declined slightly from the prior year and sequentially from the second quarter. On a year-over-year basis, the profit rate declined primarily due to unrecovered input cost inflation and promotional spending associated with the introduction of the new compact 12V Lithium Ion product line under the DeWalt, Porter Cable and Black & Decker brands. Sequentially, the profit rate declined due to a greater proportion of outdoor products in the second quarter as compared with the third quarter which is a normal seasonal effect, as well as unrecovered cost inflation and increases in new product promotion expenses. Year-to-date segment profit was $334 million, or 10.5% of net sales, in the first nine months of 2010 compared to $114 million, or 11.9% of net sales in the prior year, with the increase in segment profit attributable to the addition of Black & Decker and improved legacy Stanley performance on higher sales. Excluding the $126 million of merger-related charges, segment profit amounted to $460 million or 14.5% of net sales. The robust expansion in the year-to-date segment profit rate is primarily due to sales volume leverage and the success of the legacy Stanley Bostitch and hand tools business integration, with a modestly accretive impact from the Black and Decker business.
Security segment profit amounted to $87 million, or 15.5% of net sales, for the third quarter of 2010 as compared to $84 million, or 20.8% of net sales in the prior year. The increase in segment profit was provided by Black & Decker and the acquired companies which more than offset lower profits in the legacy Stanley business. The legacy Stanley performance was affected by the customer inventory correction, weak construction markets and mild inflation that engendered a 280 basis point decline in the organic profit rate. The third quarter 2009 segment profit rate was a record high. The previously discussed merger-related charges reduced segment profit by $10 million. Excluding such charges, the segment profit rate was 17.2% of net sales reflecting an 80 basis point dilutive impact from acquisitions which represents a sequential improvement from 15.6% on a comparable basis in the second quarter of 2010. This sequential improvement was aided by a moderation of the dilutive impact from acquisitions (80 basis points in the third quarter versus 170 basis points in the second quarter), as the SSDS France acquisition turned profitable ahead of schedule. Year-to-date segment profit was $219 million or 14.1% of net sales in the first nine months of 2010 compared to $229 million, or 19.6% of net sales, in the prior year. The merger-related charges decreased segment profit by $37 million for the 2010 year-to-date period. Aside from the merger-related charges, the segment profit rate was 16.5% reflecting 90 basis points of dilution from the acquired companies. Otherwise, the factors contributing to the year-to-date performance are primarily the same as those discussed previously in relation to the third quarter.
Industrial: Industrial sales of $517 million in the third quarter of 2010 increased 152% from $205 million in the prior year. The Black & Decker and CRC Evans businesses contributed 129% of the sales increase. Unfavorable foreign currency translation reduced sales by 4% while price had a 1% positive impact. Organic sales volume increased 26% driven primarily by strong end user demand fueled by higher global production levels and new products, and secondarily by continued customer supply chain re-stocking. This compares with a 31% unit volume decline in the prior year segment results related to recessionary economic conditions and pervasive customer de-stocking in 2009. Approximately one third of the organic volume increase is estimated to be attributable to re-stocking which moderated in relation to the second quarter of 2010. Robust volume growth in the Americas and Asia outpaced double-digit growth in Europe. The industrial and automotive repair business achieved a 20% sales volume increase as demand for tools and storage products continued to improve. The hydraulic tools business posted significant volume gains further aided by favorable steel scrap markets. On a pro forma basis, the Black & Decker engineered fastening business achieved a strong 30% increase in sales associated with significantly higher automotive vehicle production in the Americas and Japan. The pro forma Black & Decker sales were comprised of 28% unit volume, 1% negative price and 3% from an acquisition.
Industrial segment profit was $76 million, or 14.6% of net sales, for the third quarter of 2010, compared with $19 million, or 9.2% of net sales, in 2009. The merger-related charges (inventory step-up amortization) reduced segment profit by $5 million. Excluding this impact, the segment profit rate was 15.5% or 630 basis points above the prior year. This strong segment profit rate expansion was enabled by the accretive impact from Black & Decker and CRC Evans, along with favorable operating leverage and an improved cost structure in the legacy Stanley business. Year-to-date segment profit was $161 million, or 12.6% of net sales, in the first nine months of 2010 compared to $63 million, or 9.7% of net sales, in the prior year. Year-to-date 2010 segment profit includes $23 million of merger-related charges (inventory step-up amortization), and the segment profit rate was 14.4% aside from this impact. Approximately two thirds of the improvement in the year-to-date segment profit rate is attributable to the inclusion of Black & Decker and CRC Evans, and the remaining expansion in the profit rate stems from the factors discussed in relation to the third quarter results.
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The Stanley Works has a market cap of $10.32 billion; its shares were traded at around $61.97 with a P/E ratio of 16.4 and P/S ratio of 2.7. The dividend yield of The Stanley Works stocks is 2.3%. The Stanley Works had an annual average earning growth of 2.3% over the past 10 years.SWK is in the portfolios of Lee Ainslie of Maverick Capital, John Rogers of ARIEL CAPITAL MANAGEMENT LLC, David Williams of Columbia Value and Restructuring Fund, James Barrow of Barrow, Hanley, Mewhinney & Strauss, Andreas Halvorsen of Viking Global Investors LP, Bruce Kovner of Caxton Associates, Richard Aster Jr of Meridian Fund, John Buckingham of Al Frank Asset Management, Inc., Steven Cohen of SAC Capital Advisors, Charles Brandes of Brandes Investment, Jean-Marie Eveillard of First Eagle Investment Management, LLC, Richard Pzena of Pzena Investment Management LLC, Ron Baron of Baron Funds, Louis Moore Bacon of Moore Capital Management, LP, Jeremy Grantham of GMO LLC, George Soros of Soros Fund Management LLC, Jim Simons of Renaissance Technologies LLC.
Highlight of Business Operations:
Net Sales: Net sales from continuing operations were $2.369 billion in the third quarter of 2010 compared to $936 million in the third quarter of 2009, representing an increase of $1.433 billion or 153%. The Merger (139%) along with other acquisitions (9%), primarily SSDS and CRC Evans, contributed a 148% increase in net sales. Organic sales volume provided a 7% increase in net sales while customer pricing remained flat for the quarter. These benefits were partially offset by the unfavorable effects of foreign currency translation which decreased net sales by 2% due to movement in European currencies. Organic sales growth was driven by the successful launch of various new products which generally have been well received by the customers, and overall strength in end market demand, especially in industrial and emerging markets. The effect of customer inventory adjustments slowed significantly as expected in the quarter as continued re-stocking in the Industrial segment was largely offset by a large U.S. retail customer which adjusted its inventories downward. On a geographic basis, legacy Stanley unit volume sales increased 5% in the Americas (26% in Latin America), 6% in Europe, and 33% in the Asian region. By segment, legacy Stanley unit volume increased 6% in CDIY, decreased 3% in Security, which was negatively impacted by the continued weakness in U.S. commercial construction markets along with a large U.S. retailers inventory correction, and increased 28% in Industrial which benefited from strong end user demand, along with global customer re-stocking in certain distribution channels. On a pro forma basis, the legacy Black & Decker business achieved unit volume growth of 10%, reflecting positive end market demand including robust sales growth in emerging markets, along with strong new product performance.Construction & Do-It-Yourself (CDIY): CDIY net sales were $1.289 billion in the third quarter of 2010, up 294% from $328 million in the prior year. Black & Decker contributed 289% of the increase. Organic sales volume increased sales by 7%, while price and foreign currency translation each had a negative 1% impact. Organic sales growth was aided by the introduction of new hand tool products and storage lines, with growth in emerging markets, including Asia and South America. On a pro forma basis, the third quarter legacy Black & Decker power tools and accessories sales rose 7%, with an 8% increase from unit volume and 1% of negative price, associated with the successful new 12-volt compact lithium ion power tool products marketed under the DeWalt, Porter Cable and Black & Decker brands. The Black & Decker consumer products group pro forma sales rose in the high single digits boosted by emerging markets growth and strong new product performance. Consistent with the legacy Stanley business, the Black & Decker unit volume gains in Europe and emerging markets outpaced the Americas.
Segment profit was $164 million, or 12.7% of net sales, for the third quarter of 2010, compared to $48 million or 14.8% of net sales in the prior year. Excluding $6 million of merger-related costs, segment profit amounted to $170 million, or 13.2% of net sales, which compares with a 15.6% segment profit rate on a comparable basis in the second quarter of 2010. The segment profit rate, excluding such charges, declined slightly from the prior year and sequentially from the second quarter. On a year-over-year basis, the profit rate declined primarily due to unrecovered input cost inflation and promotional spending associated with the introduction of the new compact 12V Lithium Ion product line under the DeWalt, Porter Cable and Black & Decker brands. Sequentially, the profit rate declined due to a greater proportion of outdoor products in the second quarter as compared with the third quarter which is a normal seasonal effect, as well as unrecovered cost inflation and increases in new product promotion expenses. Year-to-date segment profit was $334 million, or 10.5% of net sales, in the first nine months of 2010 compared to $114 million, or 11.9% of net sales in the prior year, with the increase in segment profit attributable to the addition of Black & Decker and improved legacy Stanley performance on higher sales. Excluding the $126 million of merger-related charges, segment profit amounted to $460 million or 14.5% of net sales. The robust expansion in the year-to-date segment profit rate is primarily due to sales volume leverage and the success of the legacy Stanley Bostitch and hand tools business integration, with a modestly accretive impact from the Black and Decker business.
Security segment profit amounted to $87 million, or 15.5% of net sales, for the third quarter of 2010 as compared to $84 million, or 20.8% of net sales in the prior year. The increase in segment profit was provided by Black & Decker and the acquired companies which more than offset lower profits in the legacy Stanley business. The legacy Stanley performance was affected by the customer inventory correction, weak construction markets and mild inflation that engendered a 280 basis point decline in the organic profit rate. The third quarter 2009 segment profit rate was a record high. The previously discussed merger-related charges reduced segment profit by $10 million. Excluding such charges, the segment profit rate was 17.2% of net sales reflecting an 80 basis point dilutive impact from acquisitions which represents a sequential improvement from 15.6% on a comparable basis in the second quarter of 2010. This sequential improvement was aided by a moderation of the dilutive impact from acquisitions (80 basis points in the third quarter versus 170 basis points in the second quarter), as the SSDS France acquisition turned profitable ahead of schedule. Year-to-date segment profit was $219 million or 14.1% of net sales in the first nine months of 2010 compared to $229 million, or 19.6% of net sales, in the prior year. The merger-related charges decreased segment profit by $37 million for the 2010 year-to-date period. Aside from the merger-related charges, the segment profit rate was 16.5% reflecting 90 basis points of dilution from the acquired companies. Otherwise, the factors contributing to the year-to-date performance are primarily the same as those discussed previously in relation to the third quarter.
Industrial: Industrial sales of $517 million in the third quarter of 2010 increased 152% from $205 million in the prior year. The Black & Decker and CRC Evans businesses contributed 129% of the sales increase. Unfavorable foreign currency translation reduced sales by 4% while price had a 1% positive impact. Organic sales volume increased 26% driven primarily by strong end user demand fueled by higher global production levels and new products, and secondarily by continued customer supply chain re-stocking. This compares with a 31% unit volume decline in the prior year segment results related to recessionary economic conditions and pervasive customer de-stocking in 2009. Approximately one third of the organic volume increase is estimated to be attributable to re-stocking which moderated in relation to the second quarter of 2010. Robust volume growth in the Americas and Asia outpaced double-digit growth in Europe. The industrial and automotive repair business achieved a 20% sales volume increase as demand for tools and storage products continued to improve. The hydraulic tools business posted significant volume gains further aided by favorable steel scrap markets. On a pro forma basis, the Black & Decker engineered fastening business achieved a strong 30% increase in sales associated with significantly higher automotive vehicle production in the Americas and Japan. The pro forma Black & Decker sales were comprised of 28% unit volume, 1% negative price and 3% from an acquisition.
Industrial segment profit was $76 million, or 14.6% of net sales, for the third quarter of 2010, compared with $19 million, or 9.2% of net sales, in 2009. The merger-related charges (inventory step-up amortization) reduced segment profit by $5 million. Excluding this impact, the segment profit rate was 15.5% or 630 basis points above the prior year. This strong segment profit rate expansion was enabled by the accretive impact from Black & Decker and CRC Evans, along with favorable operating leverage and an improved cost structure in the legacy Stanley business. Year-to-date segment profit was $161 million, or 12.6% of net sales, in the first nine months of 2010 compared to $63 million, or 9.7% of net sales, in the prior year. Year-to-date 2010 segment profit includes $23 million of merger-related charges (inventory step-up amortization), and the segment profit rate was 14.4% aside from this impact. Approximately two thirds of the improvement in the year-to-date segment profit rate is attributable to the inclusion of Black & Decker and CRC Evans, and the remaining expansion in the profit rate stems from the factors discussed in relation to the third quarter results.
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